Indian Gas Exchange plans to offer 3-6 month contracts
The Indian Gas Exchange (IGX) has sought regulatory approvals to launch 3-6 month gas contracts benchmarked to international gas prices, its chief executive Rajesh Kumar Mediratta said. IGX currently allows gas suppliers to sell the fuel on the exchange for durations ranging from daily, weekly, fortnightly and monthly. It also offers intraday trading at a fixed price. Mediratta said the exchange has applied to the regulator, Petroleum and Natural Gas Regulatory Board (PNGRB), for permission to launch three-month and six-month delivery contracts indexed to gas benchmarks such as FIXI and Platts JKM, WIM and Dated Brent. “We are awaiting a clearance from PNGRB,” he said. The new long-duration contracts will have a payment cycle of a fortnight compared to the current system of payments being made in 2-3 days after delivery. Also, IGX is looking to introduce green certificates for trading, he said, as the government looks to make the usage of 1 per cent compressed biogas (CBG) mandatory for city gas sellers. “Where city gas retailers have supplies coming from CBG plants, meeting the obligation of having 1 per cent CBG in the gas they supply will not be a problem. But in places where they dont have CBG supplies, they can buy these certificates,” he said. He said, gas volume traded on the exchange crossed 1 billion cubic meters (4 crore million British thermal units) in the first nine months of the current fiscal year. This volume equals 4.1 crore mmBTU volumes traded in full 2023-24 fiscal (April 2023 to March 2024). IGX has also signed a MoU with Austria’s Central Europeans Gas Hub to explore gas trading opportunities, including those for green gases such as hydrogen and methane. “This partnership aims to strengthen India’s gas market by leveraging CEGH’s European market expertise and IGX’s deep-expertise in the Indian gas market,” he said. Key focus areas of the MoU include trading of natural gas and renewable gases like hydrogen, biomethane, and e-methane, commodity-related certificates, market development, training programs and gas-hub operations. A key objective of the partnership is to collaborate on best practices for the operations of natural gas trading focusing on enhancing the technical, operational and regulatory capabilities. Insights from the Indian and European gas markets will be utilized and international best practice will be shared, facilitating the creation of a liquid and transparent gas market. IGX and CEGH also plan to explore the development of trading platforms for emerging green gases like hydrogen, biomethane (including green gas certificates). Both parties will also work together to support gas hub operations in India, he said. “This partnership will enable us to co-develop innovative solutions for natural gas and renewable gas trading, strengthen market efficiency and enhance energy security,” he added.
Fresh US sanctions on Russian oil to disrupt Indian imports, may end price discounts, says top official
Fresh sanctions slapped by the US government on Russian oil will start impacting Indian imports of the commodity after the wind-down period expires in two months, a top government official said. The emerging scenario may also lead to a cessation of price discounts on Russian oil in “the worst-case scenario,” the official said. On Friday, the outgoing Biden administration imposed new sanctions on Russian oil producers Gazprom Neft and Surgutneftegaz and about 180 tankers ferrying Russian oil. The latest measures by the US government mean anyone buying oil from Gazprom Neft or Surgutneftegaz or getting oil delivered by sanctioned tankers will attract secondary sanctions. So far, US sanctions on the Russian energy sector have been milder and did not trigger secondary sanctions on India or other buyers of Russian oil. Sanctioned buyers of Russian oil will find it hard to make dollar payments for anything, raise funds in the US, and do business with American companies. Gazprom is a significant Russian supplier to India though Rosneft is the largest. Supplies from Surgutneftegaz are negligible. Indian refiners depend a lot on traders for Russian supplies; therefore, sanctions on tankers are more consequential than those on Gazprom. The new sanctions provide buyers a wind-down period until March 12 for completing the deals already struck. “Definitely, there will be disruption. That disruption will not be visible today or tomorrow,” said the official, asking not to be named, referring to the wind-down period. In the “worst-case” scenario, discounts available on Russian oil since the beginning of the Ukraine war will vanish, the official added. A plausible scenario can be that Russian oil, which is not affected by the latest sanctions will start getting sold at below the G7 price cap of $60 per barrel and get access to Western shipping and insurance, the official said, adding that the market may “find a way to get the oil to us.” “The market is still digesting what it actually means,” said the official, adding that the full impact will hinge on many factors including the return of Donald Trump to the White House next week, Moscow’s response, and the market reaction to the sanctions. Indian refiners are already looking for alternative supplies to make up for possible disruption in Russian supplies after March 12, the official said. Indian refiners buy Russian crude from the spot market. Reliance Industries is learnt to have recently struck an annual deal to source Russian crude from this year. The official said spot buyers will quickly switch to alternatives while term deal purchasers will have the option to modify volumes or enforce force majeure. He noted that crude prices, which have gained about $5 to cross $81 per barrel in a week, are not sustainable as there is ample spare capacity available globally. Additional supplies from the US, Canada, Brazil and Guyana can help mitigate any supply disruption from Russia even if members of the Saudi-led grouping OPEC do not utilise their 3 million barrels per day of spare capacity, the official said.
Indian Refiners Cease Trade with U.S-Sanctioned Russian Tankers
India’s refiners have stopped doing business with the Russian tankers and companies sanctioned by the U.S. on Friday, a source at the Indian government told Reuters on Monday. The outgoing U.S. Administration last week imposed the most severe sanctions on Russia’s oil yet, designating two major Russian oil companies, Gazprom Neft and Surgutneftegas, as well as 183 vessels, dozens of oil traders, oilfield service providers, insurance companies, and energy officials. It is believed that a quarter of the Russian shadow fleet has now been sanctioned. Despite the hefty sanctions, India expects its flows of crude from Russia not to be disrupted until March as the sanctioned tankers will be allowed to discharge until then, a senior Indian government official told Reuters on Monday. India will allow cargoes carrying Russian oil booked before the sanctions were announced on January 10 to discharge at ports when they arrive at Indian coasts, according to the official who spoke on condition of anonymity. India doesn’t expect major disruptions during the two-month wind-down period until March. But “Going forward, it’s early days yet to anticipate the impact, how discounts shape up, if somebody is willing to sell below the $60 price cap,” the Indian government source told Reuters. “When it comes to buyers, China and India, in general, tend to steer clear of dealing directly with tankers and entities blacklisted by the US Treasury,” Matt Wright, lead freight analyst at Kpler, wrote in a note on Friday. The newly sanctioned tankers handled about 42% of Russia’s total seaborne crude exports. Over half of this volume was shipped to China, making up about 61% of China’s seaborne imports of Russian oil. Meanwhile, most of the remaining exports went to India, contributing to nearly a third of the South Asian nation’s total intake of Russian oil, according to Kpler’s analysis. Even before the Friday sanctions, India and China had started to procure more crude from sources other than Russia and Iran, in view of the tightening U.S. sanctions on Russia and an expected clampdown on Iran’s oil exports from the incoming Trump Administration.
Six EU Members Want Lower Price Cap for Russian Oil
Six European Union members have called on the Commission to lower the price cap set on Russian oil prices by the G7 as part of a sanction series aiming to cripple Russia’s economy in response to its 2022 incursion into Ukraine. “Measures that target revenues from the export of oil are crucial since they reduce Russia’s single most important income source,” Sweden, Denmark, Finland, and the three Baltic states said in a letter, as quoted by Reuters. “We believe now is the time to further increase the impact of our sanctions by lowering the G7 oil price cap,” they added. The G7 price cap for Russian oil was set at $60 per barrel back in 2023, aiming to reduce Russia’s revenues from exporting its crude while avoiding a market shock that would lead to a price surge. The enforcement of the cap was to be in the hands of insurers and shippers carrying Russian oil. If sellers wanted to use Western insurance and tankers, they had to commit to not asking a higher price for the oil than $60 per barrel. The result of that was that Russia took to using its own tankers and its own insurers as well as coverage providers from Asia and the Middle East. An oil price shock was indeed avoided, at the cost of Russian oil continuing to flow quite freely, only in a different direction—to the East. Now, it seems that the Baltics and the Nordics have gotten inspiration from the outgoing Biden administration, which just slapped more sanctions on Russian oil ahead of Trump’s inauguration, and are pressing the European Commission for additional action as well. Russia has repeatedly stated it would not comply with any price caps. The effect on oil prices from the latest Biden sanctions is already clear: the benchmarks are up and could go higher still as supply tightens globally.
2025 Brings Fundamentals Back to the Fore in Oil Markets
Oil trading in 2024 was marked by the near complete dominance of algorithmic trading. While not a new trend, algo trading arguably reached its peak last year, with technical analysis largely displacing any factual fundamentals considerations. Instead of making traders money, however, algo trading has lost them money. Bloomberg reported earlier this month that 2024 was a loss-making year for algo traders—and it was the second loss-making year in a row for them. Throughout the year, driven by algorithms, oil traders bet on a demand slump in China and oversupply thanks to OPEC’s spare capacity and growth in production outside of OPEC, notably in the United States. Throughout the year, the algorithms—or rather, their users—pointedly ignored facts such as OPEC’s unwillingness to use that spare capacity or the trend in OECD crude oil inventories, which declined considerably during the year. Throughout the year, algo traders had an outsized impact on oil prices. And they still lost money. “Humans did have more success in 2024 than algos, which is different than the last couple of years,” CIBC Private Wealth Group senior energy trader Rebecca Babin told Bloomberg. It could probably be argued that 2024 saw the point of saturation with algo trading on the oil market, which sapped the very price volatility that algo traders thrived on in previous year. In 2024, oil prices traded in the narrowest range since 2019, per Bloomberg. As a result of these developments, algorithmic traders have reduced the weight of oil in their portfolios by as much as half, from 4% in July last year to just 2% today, according to CIBC’s Babin. This means fundamentals are back—and it’s already showing. Oil prices have been trending higher since the start of the year as supply returns to the spotlight ahead of Donald Trump’s inauguration as U.S. president. Trump is expected to tighten sanctions against Iran, crimping Middle Eastern crude oil supply, and these expectations have now trumped the perception of weak Chinese oil demand that dominated oil bets in 2024. Additional U.S. sanctions on Russian oil recently announced by the Biden administration also pushed oil higher earlier this month, again despite previous perceptions there was plenty of oil in the world that kept the benchmarks in a tight range. “The new measures are likely to give the Trump administration additional leverage in future negotiations with Russia, as it decides whether, when, and under what terms to lift Biden-imposed sanctions,” JP Morgan analysts said in a recent note. Whenever these negotiations take place and whatever their outcome, in the meantime oil prices will be higher—with the Biden admin out of office, fuel availability at home is no longer its concern. There is also the issue of energy transition and related oil demand predictions. Algo trading appears to have incorporated a lot of the assumptions made by organizations such as the International Energy Agency. The IEA has, in recent years, turned from an impartial energy provider into a staunch transition supporter, which has led some to question the reliability of its forecast data, for instance, on EV sales. This data has motivated oil trading decisions, and it has resulted in losses, inaccurately predicting oil demand destruction where in fact demand has continued to grow, including in China, the world’s biggest EV market. EV sales, meanwhile, have begun to decline in stark opposition to predictions they would keep surging. Another reason for the losses experienced by algorithmic traders and their clients is the volume of algo trading, it seems. On several occasions last year, algo trading amplified oil price changes prompted by certain events, such as OPEC+ decisions to extend their voluntary production cuts. In June, an OPEC+ update to that effect caused a massive selloff in oil because it was perceived as a bearish signal for demand. Algo trading made the selloff even more massive. “CTAs are just hammering away the market with massive selling,” one analyst from TP ICAP Group told Bloomberg at the time. Besides hammering away on the market, trend followers also overbet on a continued oil rout as well, eventually losing money as prices recovered—because fundamentals began getting some attention. This year could deliver another lesson for oil traders who consider it more convenient and reliable to base their decisions on software. Forecasts about U.S. oil production growth are being revised in a hurry as reports about the maturation of the shale patch are multiplying. Forecasts about Chinese oil demand are changing, too, with the government in Beijing signaling it had more stimulus packages up its sleeve. Finally, no one seemed to expect the parting sanction slap on Russia by the outgoing U.S. administration. After two years of over-reliance on software algorithms, 2025 could be the year fundamentals-based trading reestablishes itself. What impact this would have on prices remains to be seen.
Stricter US sanctions threaten Russia’s oil trade with India and China: Report
New US sanctions on Russian oil producers and ships are expected to disrupt Russia’s oil trade with India and China, two of its largest customers, according to a report by news agency Reuters. This development may lead to higher oil prices and increased freight costs for both countries as they look to source oil from alternative markets. The US Treasury announced tougher sanctions on Friday, targeting major Russian oil producers Gazprom Neft and Surgutneftegas, as well as 183 ships involved in transporting Russian oil. These measures aim to cut into the revenues Russia uses to fund its war in Ukraine.
Europe threatens to trigger a global scramble for natural gas supplies
The world is bracing for a fight for natural gas supplies this year, prolonging the pain of higher bills for consumers and factories in energy-hungry Europe and putting poorer emerging countries from Asia to South America at risk of getting priced out of the market. For the first time since the energy crisis was turbocharged by Russia’s war in Ukraine, Europe risks failing to meet its storage targets for next winter, setting the stage for one last scramble for supplies before new liquefied natural gas capacity starts to ease the situation next year. While Europe has enough gas reserves to get through this winter and prices have eased since the start of the year, inventories are being eroded by cold weather, which swept across the continent this weekend. Supply options have been squeezed since the start of this year, when Russian pipeline deliveries through Ukraine ceased following end of a transport agreement. “There will certainly be an energy gap in Europe this year,” said Francisco Blanch, commodity strategist at Bank of America Corp. “That means that all the incremental LNG that’s coming online this year around the world will go into making up for that shortfall in Russian gas.” To cover its projected demand, Europe will need to import as much as an extra 10 million tons per year of LNG — about 10 per cent more than in 2024, according to Saul Kavonic, an energy analyst at MST Marquee in Sydney. New export projects in North America could help ease market tightness, but that hinges on how quickly the facilities can ramp up production. With fewer options to restock for next winter, Europe will need LNG shipments, pulling some away from Asia, home to the world’s biggest consumers. Depending on how demand shapes up, the competition would drive prices higher than countries like India, Bangladesh and Egypt can afford and weigh on Germany’s economic recovery.
HPCL arm successfully commissioned LNG Regasification terminal in Gujarat
Hindustan Petroleum Corporation (HPCL) has announced the successful commissioning of a 5 MMTPA capacity LNG Regasification terminal at Chhara, Gujarat, established by its wholly owned subsidiary, HPCL LNG. The company stated that the ship, Maran Gas Coronis, carrying LNG cargo, berthed on 6 January 2025, and the discharge of the cargo into the onshore LNG tanks was successfully completed on 12 January 2025. The terminal, located at Chhara Port in Gir-Somnath District, Gujarat, has been developed with an investment of approximately Rs 47.50 billion. It features facilities for LNG receipt through ocean tankers, marine unloading, storage, LNG road tanker loading, regasification and the supply of regasified LNG to the gas grid. HPCL LNG will operate the terminal under a tolling model, offering services to third-party users through long-term capacity booking contracts and/or master regasification agreements for spot cargoes. The company has already brought in its first cargo, and the terminal is set to begin commercial operations soon. HPCL is engaged in the business of refining crude oil and marketing petroleum products. It operates through two segments: downstream and exploration and production of hydrocarbons. The companys standalone net profit tumbled 87.67% to Rs 6.3118 billion in Q2 FY25 as against Rs 51.1816 billion posted in Q2 FY24. Net sales (excluding excise duty) grew by 4.29% year on year (YoY) to Rs 994.1316 billion in the September 2024 quarter.